Question 1

Percentage of market share and rate of on-time deliveries are indicators of the ________ perspective.

Accepted Answer

A)  quality management 
B)  internal business 
C)  customer 
D)  learning and growth 
A)  quality management 
B)  internal business 
C)  customer 
D)  learning and growth

Question 2

Which of the following is most likely to appear on the responsibility report for a manufacturing production supervisor?

Accepted Answer

A)  direct labor costs 
B)  factory rent 
C)  advertising costs 
D)  depreciation 
A)  direct labor costs 
B)  factory rent 
C)  advertising costs 
D)  depreciation

Question 3

Trendables,a manufacturer of electronic jewelry had the following results from its Subunit W:
 $\begin{array}{|l|r|r|r|r}
\hline & & & \text { Flexible } & \
& && \text { Budget } & \
&\text { Actual } & \text { Flexible } & \text { Variance } & \% \text { of Variance } \
\text { Subunit W } & \text { Results } & \text { Budget } & \text { (F or U) } & \text { (F or U) }\
\hline \text { Net Sales Revenue } & \$ 365,000 & \$ 340,000 & \quad\quad&\quad\quad \
\hline \text { Variable Expenses } & 151,000 & \underline{137,000} & & \
\hline \text { Contribution Margin } & 214,000 & 203,000 & & \
\hline \text { Traceable Fixed Expenses } & \underline{50,000} & \underline{37,000} & & \
\hline \text { Divisional Segment Margin } & \$ 164,000 & \$ 166,000 & & \
\hline
\end{array}$ Requirements:
1.Complete the performance evaluation report for this subunit (round to two decimal places).
2.Based on the data presented and your knowledge of the company,what type of responsibility center is this subunit?
3.Which items should be investigated if management's decision criteria is to investigate all variances equal to or exceeding $10,000 and 10% (both criteria must be met)?
4.Is it possible that the variances are due to a higher-than-expected sales volume?
5.Which balanced scorecard perspective is being addressed by this performance report? Is it a lead or lag indicator?

Accepted Answer

Requirement 1:
 Requirement 2:
The repor

Question 4

Companies evaluate investment centers using the same measures as the profit centers.

Accepted Answer

A) True 
 B)False

Question 5

Decentralization may cause the company to duplicate certain costs or activities.

Accepted Answer

A) True 
 B)False

Question 6

In addition to considering both the division's operating income and its average total assets,residual income incorporates top management's target rate of return.

Accepted Answer

A) True 
 B)False

Question 7

Express Logistics provides the following information: $$\begin{array} { | l | r | } 
\hline \text { Operating income } & \$ 1,600,000 \
\hline \text { Net sales } & \$ 13,500,000 \
\hline \text { Average total assets } & \$ 1,950,000 \
\hline \text { Management's target rate of return } & 25 \% \
\hline
\end{array}$$ What is the company's return on investment? (Round your answer to two decimal places.)

Accepted Answer

A)  11.85% 
B)  14.44% 
C)  82.05% 
D)  25.00% 
A)  11.85% 
B)  14.44% 
C)  82.05% 
D)  25.00%

Question 8

Stealth,Inc.produces two types of drones,rotary and fixed wing.Stealth estimated $850,000 of manufacturing overhead,and 62,500 machine hours for the year.The allocation base for overhead costs is machine hours.The rotary model actually consumed 18,000 machine hours,and the fixed wing type consumed 44,500 machine hours.How much overhead is allocated to the rotary model? (Round intermediary calculations to the nearest cent.)

Accepted Answer

A)  $244,800 
B)  $605,200 
C)  $180,000 
D)  $302,600 
A)  $244,800 
B)  $605,200 
C)  $180,000 
D)  $302,600

Question 9

When a division is operating at capacity,the transfer price should be ________.

Accepted Answer

A)  based on opportunity cost 
B)  a market-based transfer price 
C)  a cost-based transfer price 
D)  the total manufacturing cost 
A)  based on opportunity cost 
B)  a market-based transfer price 
C)  a cost-based transfer price 
D)  the total manufacturing cost

Question 10

For each of the following activities,indicate an appropriate allocation base:
 $$\begin{array} { | l | l | } 
\hline \text { Activity } & \text { Allocation Base } \
\hline \text { Warranty Services - Providing service } & \
\text { for defective products } & \
\hline \text { Setup - Setting up machines for } & \
\text { production } & \
\hline \text { Shipping-Shipping finished products } & \
\text { to customers } & \
\hline \text { Machining-Machine usage } & \
\hline \text { Purchasing - Purchasing raw materials } & \
\hline
\end{array}$$

Accepted Answer

Students answers will vary.Suggested Ans

Question 11

Which of the following managers is likely to have the least amount of responsibilities?

Accepted Answer

A)  the manager of a cost center 
B)  the manager of a profit center 
C)  the manager of an investment center 
D)  the manager of a transfer pricing center 
A)  the manager of a cost center 
B)  the manager of a profit center 
C)  the manager of an investment center 
D)  the manager of a transfer pricing center

Question 12

For each of the following activities,indicate an appropriate allocation base:
 $$\begin{array} { | l | l | } 
\hline \text { Activity } & \text { Allocation Base } \
\hline \text { Materials purchases } & \
\hline \text { Machine set-ups } & \
\hline \text { Quality inspections } & \
\hline \text { Employee training } & \
\hline
\end{array}$$

Accepted Answer

Answers will vary.
 \[\begin{array} { |

Question 13

Operating income alone does not indicate how efficiently a segment is using its assets.

Accepted Answer

A) True 
 B)False

Question 14

A modification of the overhead allocation method which uses a single plantwide rate,is to use multiple predetermined overhead allocation rates that have a single allocation base.

Accepted Answer

A) True 
 B)False

Question 15

Profit center responsibility reports include ________.

Accepted Answer

A)  revenues only 
B)  invested capital 
C)  both revenues and expenses 
D)  returns on investments 
A)  revenues only 
B)  invested capital 
C)  both revenues and expenses 
D)  returns on investments

Question 16

If upper management uses a short time frame to calculate ROI and RI,division managers have an incentive to take actions that will lead to an immediate increase in these measures.

Accepted Answer

A) True 
 B)False

Question 17

What is activity-based management? How is it different from activity-based costing?

Accepted Answer

Activity-based management uses activity-

Question 18

Which of the following is the correct formula for calculating return on investment?

Accepted Answer

A)  Net profit / Sales 
B)  Gross profit / Sales 
C)  Operating income / Average total assets 
D)  Earnings available to stockholders / Number of outstanding shares of stock 
A)  Net profit / Sales 
B)  Gross profit / Sales 
C)  Operating income / Average total assets 
D)  Earnings available to stockholders / Number of outstanding shares of stock

Question 19

Which of the following is a not a decision that management must make before calculating ROI and RI?

Accepted Answer

A)  Should nonproductive assets be included in the average total asset calculation? 
B)  Should gross book value or net book value of assets be used? 
C)  Should a simple average of the beginning and ending total liabilities be used? 
D)  Should a short term focus be used? 
A)  Should nonproductive assets be included in the average total asset calculation? 
B)  Should gross book value or net book value of assets be used? 
C)  Should a simple average of the beginning and ending total liabilities be used? 
D)  Should a short term focus be used?

Question 20

To evaluate the financial performance of an investment center,a business needs key performance indicators that measure ________.

Accepted Answer

A)  manufacturing efficiency and product defect rate 
B)  operating income and the use of the center's assets 
C)  customer satisfaction and market share 
D)  generation of sales revenues and control of operating expenses 
A)  manufacturing efficiency and product defect rate 
B)  operating income and the use of the center's assets 
C)  customer satisfaction and market share 
D)  generation of sales revenues and control of operating expenses

Exam 24: Cost Allocation and Responsibility Accounting

Percentage of market share and rate of on-time deliveries are indicators of the ________ perspective.

Which of the following is most likely to appear on the responsibility report for a manufacturing production supervisor?

Companies evaluate investment centers using the same measures as the profit centers.

Decentralization may cause the company to duplicate certain costs or activities.

In addition to considering both the division's operating income and its average total assets,residual income incorporates top management's target rate of return.

Express Logistics provides the following information: Operating income \ 1,600,000 Net sales \ 13,500,000 Average total assets \ 1,950,000 Management's target rate of return 25\% What is the company's return on investment? (Round your answer to two decimal places.)

When a division is operating at capacity,the transfer price should be ________.

Which of the following managers is likely to have the least amount of responsibilities?

For each of the following activities,indicate an appropriate allocation base: Activity Allocation Base Materials purchases Machine set-ups Quality inspections Employee training

Operating income alone does not indicate how efficiently a segment is using its assets.

A modification of the overhead allocation method which uses a single plantwide rate,is to use multiple predetermined overhead allocation rates that have a single allocation base.

Profit center responsibility reports include ________.

If upper management uses a short time frame to calculate ROI and RI,division managers have an incentive to take actions that will lead to an immediate increase in these measures.

What is activity-based management? How is it different from activity-based costing?

Which of the following is the correct formula for calculating return on investment?

Which of the following is a not a decision that management must make before calculating ROI and RI?

To evaluate the financial performance of an investment center,a business needs key performance indicators that measure ________.

Accounting and the Business Environment

Recording Business Transactions

The Adjusting Process

Completing the Accounting Cycle

Merchandising Operations

Merchandise Inventory

Accounting Information Systems

Internal Control and Cash

Receivables

Plant Assets,natural Resources,and Intangibles

Current Liabilities and Payroll

Partnerships

Corporations

Long-Term Liabilities

Investments

The Statement of Cash Flows

Financial Statement Analysis

Introduction to Managerial Accounting

Job Order Costing

Process Costing

Cost-Volume-Profit Analysis

Master Budgets

Flexible Budgets and Standard Cost Systems

Short-Term Business Decisions

Capital Investment Decisions

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